Question

Refer to the following financial statements for Crosby Corporation:   
  

CROSBY CORPORATION Income Statement For the Year Ended December 31, 20X2
Sales		$	3,940,000
Cost of goods sold			2,580,000
Gross profit		$	1,360,000
Selling and administrative expense			697,000
Depreciation expense			272,000
Operating income		$	391,000
Interest expense			88,000
Earnings before taxes		$	303,000
Taxes			234,000
Earnings after taxes		$	69,000
Preferred stock dividends			10,000
Earnings available to common stockholders		$	59,000
Shares outstanding			150,000
Earnings per share		$	0.39

  

Statement of Retained Earnings For the Year Ended December 31, 20X2
Retained earnings, balance, January 1, 20X2	$	342,700
Add: Earnings available to common stockholders, 20X2		59,000
Deduct: Cash dividends declared and paid in 20X2		218,000
Retained earnings, balance, December 31, 20X2	$	183,700

  

Comparative Balance Sheets For 20X1 and 20X2
	Year-End 20X1				Year-End 20X2
Assets
Current assets:
Cash		$	171,000			$	127,000
Accounts receivable (net)			543,000				546,000
Inventory			656,000				697,000
Prepaid expenses			63,500				39,700
Total current assets		$	1,433,500			$	1,409,700
Investments (long-term securities)			92,000				81,100
Gross plant and equipment	$ 2,250,000				$ 2,730,000
Less: Accumulated depreciation	1,750,000				2,022,000
Net plant and equipment			500,000				708,000
Total assets		$	2,025,500			$	2,198,800
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	365,000			$	626,000
Notes payable			514,000				514,000
Accrued expenses			79,800				57,100
Total current liabilities		$	958,800			$	1,197,100
Long-term liabilities:
Bonds payable, 20X2			134,000				228,000
Total liabilities		$	1,092,800			$	1,425,100
Stockholders’ equity:
Preferred stock, $100 par value		$	90,000			$	90,000
Common stock, $1 par value			150,000				150,000
Capital paid in excess of par			350,000				350,000
Retained earnings			342,700				183,700
Total stockholders’ equity		$	932,700			$	773,700
Total liabilities and stockholders’ equity		$	2,025,500			$	2,198,800

  
a. Prepare a statement of cash flows for the Crosby Corporation: (Amounts to be deducted should be indicated with parentheses or a minus sign.)
  

Answer 1

Crosby Corporation
Statement of Cash flows
For the Year Ended December 31, 20X2
Cash flows from operating activities
Net Income		$       69,000
Adjustments to reconcile net income to ;
Depreciation expense	$    272,000
Increase in accounts receivable	$       (3,000)
Increase in inventory	$    (41,000)
Decrease in prepaid expenses	$       23,800
Increase in accounts payable	$    261,000
Decrease in accrued expenses	$    (22,700)
		$    490,100
Net cash provided by operating activities		$    559,100
Cash flows from investing activities
Cash received from sale of investments	$       10,900		92000-81100
Cash paid for purchase of equipment	$ (480,000)		2250000-2730000
Net cash used by investing activities		$ (469,100)
Cash flows from financing activities
Cash received from issuance of bonds	$       94,000
Cash paid for preferred dividends	$    (10,000)
Cash paid for common dividends	$ (218,000)
Net cash used by financing activities		$ (134,000)
Net Decrease in cash		$    (44,000)
Cash and cash equivalents at beginning of period		$    171,000
Cash and cash equivalents at end of period		$    127,000

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